From June 6 to 9, 2024, European citizens will cast their vote to elect the 720 members of the new European Parliament and determine the future direction of the EU’s policy agenda.
From a sustainability perspective, the 2019 – 2024 mandate was heavily influenced by the EU Green Deal and its overarching goal of achieving carbon neutrality by 2050. This included the ‘Fit for 55’ package, a set of measures to help the continent meet its interim target of reducing emissions by 55% by 2030. The EU Green Deal is closely linked to other policy priorities of the European Commission:
Figure: Policy priorities of the EU (2019 - 2024)
Source: European Parliament (as of June 5, 2024)
During the 2019 – 2024 term, the EU paved the way for numerous regulatory schemes that aim to drive decarbonization, promote respect for human rights, strengthen consumer rights, and shape a more sustainable economy. Among of the main legislations passed with a direct bearing on companies’ procurement and supply chain practices are:
In addition, many industry-specific policy initiatives related to clean transport, the circular economy (e.g. Batteries Regulation) or sustainable buildings have indirect impacts on how companies need to manage their supply chains.
Most companies will be affected by supply chain-related EU legislation in one way or another, either directly or indirectly. The EU’s policy agenda has significant global ramifications, impacting both third-country companies with sizeable operations in the EU and countless businesses, including SMEs, along complex value chains around the world.
Reporting on sustainability practices and performance is a cornerstone of most regulatory initiatives. Comprehensive data insights are required to achieve transparency and ensure the traceability of products, components and raw materials. Supplier engagement and collaboration has therefore become a core tenet of such efforts. To succeed, companies must move beyond traditional customer-supplier interactions and build strategic partnerships and alliances en route to more sustainable business models. The role of industry and cross-sector initiatives is thus gaining in importance. They allow member companies to pool their resources and more easily enforce harmonized standards along their supply chains.
Many European companies are likely to reconfigure their trade and supply chains, reshoring or nearshoring some of their operations in favor of local or regional suppliers with better ESG credentials. Ultimately, certain regulations are likely to result in product redesigns, which may equally trigger changes in supply chain networks and sourcing practices.
Towards the end of the 2019 – 2024 mandate, several pieces of legislation crossed the finish line after being adopted by the Council of the EU, including the Corporate Sustainability Due Diligence Directive (CSDDD), the Net-Zero Industry Act (NZIA), the Eco-design for Sustainable Products Regulation (ESPR), and the Right-to-Repair Directive.
Work on other legislative files, which are still at various stages of the legislative process, will be put on hold and resumed after the elections. Examples of initiatives that have the backing of the European Parliament but still need the green light from the Council include the Green Claims Directive, the Packaging and Packaging Waste Regulation, and the highly disputed Nature Restoration Law.
When analyzing the manifestos of the various political groups in the European Parliament, the Conclusions of the European Council’s special meeting in April 2024, the “Letta Report” on the future of the EU Single Market, which will feed into the EU’s Strategic Agenda for 2024 – 2029, and the declarations of major industry associations, a number of policy priorities stand out:
Recent regulatory developments are already pointing in a similar direction. In February 2023, the EU paved the way for the Green Deal Industrial Plan. It includes the Critical Raw Materials Act (CRM Act), which aims to ensure EU access to a secure and sustainable supply of critical raw materials, and the Net-Zero Industry Act (NZIA). The latter was adopted by the Council on May 27, 2024, and intends to ramp up clean technology manufacturing capacities in the EU. However, these efforts are lagging behind comparable initiatives in other countries, such as the Inflation Reduction Act (IRA) in the United States. Further concerted action aimed at strengthening the EU’s sovereignty and competitiveness is therefore likely over the next five years.
The EU election is likely to herald a reshuffling in the European Parliament and may see the emergence of new political groups. The center-right European People’s Party (EPP) and the center-left Socialists and Democrats (S&D) are widely expected to remain the largest groups in the new European Parliament. The right-wing camp, including the European Conservatives and Reformists (ECR) and the far-right Identity and Democracy Group (ID), and other non-affiliated parties, are set to gain seats at the expense of the Liberals (Renew Europe), the Greens and the Left.
This means that the balance of power in the European Parliament could shift towards more eurosceptic and anti-ESG groups. As a result, green initiatives are likely to face greater opposition in the upcoming 2024 – 2029 term.
The EU Green Deal’s goal of achieving carbon neutrality by 2050 is enshrined in law and legally binding. Still, environmental topics are poised to take a back seat in the coming years and we are likely to see increased efforts to reconcile the sustainability agenda with the need to improve industrial competitiveness.
Legislative initiatives of the EU Green Deal that were not adopted by the European Parliament or the Council, for example the circularity requirements for vehicle design and management of end-of-life vehicles, face an uncertain future in a new European Parliament with a stronger right-wing faction.
An analysis by Politico shows how policy areas such as agriculture, climate, energy, technology, sustainability, and mobility could be impacted by a more right-wing Parliament.
After the elections, there are two dates that observers should mark in their calendars. On June 27 and 28, the 27 heads of state and government will gather at the first meeting of the European Council to adopt the Strategic Agenda for 2024 – 2029. In doing so, they will map out the EU’s policy priorities and general direction for the next mandate and provide critical guidance to the other EU institutions.
In September, the newly elected President of the European Commission is expected to present the new legislative program in the State of the Union speech and outline the main guardrails of EU policymaking over the next five years.
While the 2019 – 2024 mandate was predominantly about setting up the regulatory framework for the EU’s green agenda, the new EU institutions will have to ensure the effective implementation of adopted legislation and develop accompanying measures, i.e. support tools, for businesses.
Decisions in the next mandate are likely to be gauged on their impact on industrial competitiveness. It has therefore been suggested that competitiveness checks should be carried out on individual legislative initiatives, strategies and programs.
Whatever the outcome of the EU election, IntegrityNext stands firm as a trusted partner for sustainable supply chain management. We support you in a number of ways:
The IntegrityNext platform is continuously enhanced to meet evolving business and supply chain management needs.
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As both the EU Parliament and Council of the EU give the go-ahead for the Corporate Sustainability Due Diligence Directive (CSDDD), many companies will have to up their game to comply with the new rules.
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